Smith on Human Capital

J.A. Smith, that is:

"Is labour capital? If a labour meeting labor in act, "labouring," certainly not. But the strengths, etc., which is employed in labor certainly is actual capital when it is in use, potential capital before it is in use. The labourer is therefore just as much and as really "a capitalist" as the employer. More exactly, the abilities, etc. presupposed by economic labour are capital, and their possessor is 'a capitalist.' But they are not usually recognized as, or named, capital... The refusal to call them capital wrongly separates them from other parts of wealth." -- J.A. Smith, “Further Notes on Some Fundamental Notions of Economics: Capital,” Economic Review, 1914.

Although Smith does not use the term "human capital," it clearly is what he is talking about. Of course people, such as Adam Smith, had earlier noted that increases in human skills play an important part in increases in production. But had anyone earlier than 1914 explicitly asserted that such skills are capital?

8 comments:

  1. Thank you Gene for a few understandable posts.

    I can't understand your debates with Ken & Samson on philosophy.

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    1. Neither does Gene. :)

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  2. Maybe it's easier to think of people as capital if you think in terms of slavery. Or if you remember that the word "capital" is related to "cattle" (and "chattel").

    But that considers people as property and is entirely different from saying it makes people capitalists.

    I want to agree with JASmith that my skills are my capital. But I'm thinking my skills are more like "land", and wages are more like "rent" than profit.

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    1. "Maybe it's easier to think of people as capital if you think in terms of slavery."

      But Smith is NOT saying "People are capital"!

      He is saying our skills are capital we possess. And he regards land as capital. Plus, certainly most of our skills we were not born with.

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    2. (you didn't quite get to my second paragraph, did you)

      > certainly most of our skills we were not born with.

      Yeah, good point.

      > He is saying our skills are capital we possess. And he regards land as capital.

      I really like that Adam Smith distinguishes land from labor from capital. Book One Chapter Six.

      Your Smith seems to want to call everything "capital". Let me make Schumpeter's "distinction" plural: if we do not make distinctions, we shall never be able to say any more than that everything depends upon everything.

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    3. "(you didn't quite get to my second paragraph, did you)"

      Yes, I sure did.

      'Your Smith seems to want to call everything "capital".'

      Your you seems to want to reach sweeping conclusions about people's thought based on a few snippets of text.

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    4. > Your you seems to want to reach sweeping conclusions about people's thought based on a few snippets of text.

      But they were *your* snippets. I accepted them, put them together, and looked at what you said.

      You said: "He is saying our skills are capital ... And he regards land as capital."
      I said Your Smith seems to want to call everything "capital". I think I drew a fair conclusion from the facts you presented.

      I went back and looked at your post. You quote JASmith: "More exactly, the abilities, etc. presupposed by economic labour are capital... The refusal to call them capital wrongly separates them from other parts of wealth."

      Okay. But ADAM Smith says the wages of labor and the profits of stock are regulated by quite different principles, and I suggest that Adam's argument is better than JA's.

      "The profits of stock, it may perhaps be thought, are only a different name for the wages of a particular sort of labour, the labour of inspection and direction. They are, however, altogether different, are regulated by quite different principles, and bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labour of inspection and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock."

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    5. "But they were *your* snippets."

      So what? Did I say I had given a complete picture of the thought of JA Smith?

      "Okay. But ADAM Smith says the wages of labor and the profits of stock are regulated by quite different principles, and I suggest that Adam's argument is better than JA's."

      No, this is just Adam Smith's failure to arrive at marginal thinking.

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